Over the past few years, yield-enhanced structured products have been marketed to older investors as a way to increase potential payouts in exponential fashion. However, these same products have provoked FINRA-issued warnings as the pitfalls and greater risks become buried underneath the promises of higher returns in shorter amounts of time.
In April, FINRA vowed to ramp up an investigation into firms' marketing of complex financial products directed at seniors and elderly customers. Because the products are designed to reap high commissions for brokers, brokers are placed in a position where selling the products is extremely enticing, even if the client who purchases the product is not at all suitable to take on the risk.
For instance, brokers have been fined, ordered to pay restitution and suspended or even barred for selling complex structured products to what the industry deems "unsophisticated, elderly and retired investors"—or those who simply cannot afford to incur the high risk associated with these yield-enhanced products.
This, combined with lower yields from banks and bonds has made the yield-enhanced structured product an attractive alternative.
This appeal, however, should not detract from the significant pitfalls associated with complex investment products.
As FINRA wrote in a 2011 release, these products are often unsecured, increasingly risky, highly opaque and illiquid. They may be associated with significant fees and carry a significant term during which investors cannot withdraw funds or else be susceptible to a momentous penalty.
If you have invested in a yield-enhanced structured product with a broker or firm that has failed to adequately disclose the associated risks or has made an unsuitable recommendation toward a certain product that has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.
News: Yield-Enhanced Products The Latest Investor Time Bomb (Forbes)